Suppose your firm issued a Buy rating on XYZ security, a thinly traded stock, more than a year ago based on its own independent research. You have a client who requested to buy more of XYZ every few weeks since the recommendation until he accumulated a large position in XYZ.
Recently, your client ordered you to liquidate his entire position in XYZ. You initially refuse to do the order saying that the firm still has a Buy rating on it and that the sudden liquidation of such a large position will have adverse effects on capital markets. Your client still insists that you liquidate it all and you comply with his order (although his strange request raised some eybrows.)
So you sell all of this client’s shares of XYZ that day… the price of XYZ plunges 10%. The next day, bargain seekers buy back XYZ and it rallies 8%. The day after that, XYZ drops over 50% due to a scandal finally hitting the news. A week later, you are notified by the SEC that your client had possession of insider information regarding XYZ.
In this situation, have you violated any of the Codes and Standards?